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The Sinocism China Newsletter 08.06.13

"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner

My Dealbook column this week looks at how Android may be coring Apple in China as well as why we we are likely to see the “Coming Muddle Through, Not Collapse, of China”. Here are some excerpts from the Changing State of Smartphone Competition in China:

The iPhone is no longer the most sought after phone in the country, and the company still does not have a relationship with China Mobile, the country’s largest mobile operator. Tim Cook, Apple’s chief executive, recently visited Beijing and met again with the chief executive of China Mobile, but no deal was announced.

When the iPhone 4 was the hottest phone in the world, Apple might have had some leverage in negotiating a favorable deal with China Mobile. But that is no longer true. The top end Android phones have caught up, and until Apple upgrades the iPhone with a bigger screen and a new look, it seems unlikely that it can reignite the crazy desire its phones once aroused in China. The iTunes ecosystem “lock-in” effect is also weak in China, making it easier for consumers to switch phones.

Rumors abound that Apple is planning to release a cheaper version of the iPhone. China is flooded with cheap Android phones that continue to get better and cheaper, and Xiaomi’s Red Rice is the latest example, with better marketing. China Mobile has also just announced its own brand of smartphones, priced at 1299 renminbi ($212) and 499 renminbi ($81).

Google’s Android operating system is mostly de-Googled in China, so while its proliferation may not directly benefit Google’s bottom line, it is damaging the prospects for Apple in the world’s largest phone market.

About the coming muddle through:

“China’s Coming Muddle Through” would never sell as a book. Nor does it make for a good TV soundbite about what is going on in China. But it may be the most likely outcome for the economy.

The Capital Economics research firm wrote an excellent note on Aug. 1 asking, “How Close Is China to a Crisis?” The report, publicly available as a PDF, is a cogent look at the state of economy from a firm that two years ago predicted sub-8 percent growth for China in 2013, well ahead of many other economists. The short answer to its question is “not too close.”

The economy will not be pretty going forward, but in the 24 years that I have been in and out of China, I cannot think of a year where things were ever smooth. Muddle through has worked in the past, and there is a good chance it will work in the future, even if that position will not get me a book deal.

China PBOC-Backed Paper: Repo Resumption Is ‘Mini Stimulus’ | MNI The People’s Bank of China resumed injections of liquidity via its biweekly open market operations as part of its “mini stimulus” response to the State Council’s signal to stabilize economic growth, the Financial News said Monday. The central bank-backed newspaper ruled out any move to cut the reserve requirement in the near-term, but said the PBOC’s resumption of injections via reverse repos signals its willingness to support the market… If the editorial does reflect PBOC thinking, it represents a stunning reversal from just over a month ago, when the bank was deliberately starving the interbank system of liquidity in a bid to force banks to deleverage.

Related:PBoC tightening by stealth? | FT Alphavilleanalysts are confused. who is right? I’d guess the paper affiliated with the PBoC // Zhang has been saying for some time that the PBoC does not seem willing to ease, a view which he says was compounded by the PBoC’s Q2 monetary policy report published last week: The top priorities for the PBoC changed from “stabilizing growth, containing inflation, managing risks” in the Q1 report to “stabilizing growth, rebalancing the economy, promoting reforms, and managing risks”. Meanwhile, PBoC data released last week showing that in June, interbank market lending fell a total 60.2 per cent year-on-year, and almost the same amount month-on-month.

China’s Taobao to sell fund products in September – Xinhua Taobao.com, China’s leading online shopping platform, has delayed the sale of fund products until late September at the earliest, Monday’s China Securities Journal reported. The original date had been set for late August. “The exact date is not decided as it takes time to get feedback from the supervision departments and finish system tests between Taobao and fund companies,” said the newspaper, citing a fund manager who requested anonymity.

Related:Billionaire Ma’s Alipay Offers Payment Services for Funds – Bloomberg Alipay has reached cooperation agreements with 37 companies, Florence Shih, a spokeswoman at Ma’s Alibaba Group Holding Ltd., said in an e-mailed statement today confirming a filing with the China Securities Regulatory Commission. “The specific forms of cooperation vary; in most cases, Alipay provides payment services on the fund companies’ official websites,” Shih said without elaborating further. Ma, the chairman of China’s largest e-commerce company which last month won regulatory approval to expand funding for its online loans business, has said an outsider was needed to “stir things up” in the country’s financial industry. The cooperation with the fund companies, including Bank of Communications Schroder Fund Management Co. and Aegon-Industrial Fund Management Co., will help Ma extend his reach in financial services, according to IResearch’s Wang Weidong. // don’t underestimate the impact of these developments on the traditional banking industry

Four Shanghai Court Officials Suspended From Post over Online Sex Expose-Caijing Shanghai’s Supreme Court and local party disciplinary arm announced Sunday that four court officials embroiled in a sex-video scandal, including Presiding judge, have already been sacked from their current positions and are being investigated. The 3-hour video — circulated online is a clip — was taken by a business man, who claimed that he lost a lawsuit due to potential influence exerted by one of the officials embroiled with the scandal.

Related:China Voice: CPC to maintain high pressure on corruption – Xinhua | English.news.cn For those questioning whether the Communist Party of China (CPC) is serious about its anti-corruption drive, the growing number of officials under punishment has shown the party’s zero-tolerance to such wrongdoing. Four court officials in Shanghai were suspended from their posts last week and investigated after alleged hiring of prostitutes at a nightclub. Last month, a township-level CPC official in north China’s Hebei Province was fired after an investigation showed he spent 200,000 yuan (about 32,400 U.S. dollars) on a wedding banquet for his daughter, a move deemed unacceptable under China’s ongoing anti-extravagance campaign. These cases of low-level officials, or “flies” as they have been labeled, were followed by the the public prosecution of Bo Xilai, former CPC chief of southwest China’s Chongqing Municipality.

Related:法官嫖妓 | 微话题-一起聊聊吧！ the whoring court officials are the top topic on weibo as of this writing…that was an expensive 15-30 minutes…probably actually even shorter…

Related:上海高院法官涉嫌集体嫖娼_腾讯新闻_腾讯网 QQNews special page on the court officials…They are getting the full propaganda treatment, though one not like to finish with happy ending for them

Is China’s vast Web monitoring actually helping to grow democracy?–-Washington Post– Colleague and new Beijing bureau chief Simon Denyer[WaPo has had a lot of turnover in this job] looked into these new programs, even visiting one such center devoted to monitoring and analyzing Chinese social media conversation, the People’s Daily Online Public Opinion Monitoring Center. Chinese officials, he explains, appear to increasingly understand the power of public opinion; mass outrage on social media can spark real-world protests and even force, say, local authorities to reconsider where they build a chemical plant…The program seems like an implicit admission from Chinese leaders that they no longer have the power to control public opinion in their country and must learn how to react to it as well. And that raises an interesting question: Is this program just a savvier version of the old ways, a more sophisticated means of allowing the Chinese Communist Party to guide public opinion in the world’s most populous country? Or it is a significant advance for public accountability in China, giving Chinese citizens more of a voice in how their country is run even if the party remains the ultimate authority? Could it even be both?

Related:Proto-Democratization in China? | Dart-Throwing Chimp When I read the article, it reminded me of a school of thought in Soviet studies that saw important (if underdeveloped) features of democracy in the workings of the Communist Party of the Soviet Union (CPSU). By incorporating an array of interest groups and creating channels for members of those groups to transmit their concerns to Soviet leaders, the thinking went, the CPSU after Stalin had built a form of organized pluralism that wasn’t as different from Western democracy as we conventionally thought. Other Sovietologists, however, countered that these claims about interest-group politics missed the forest for the trees. In a society that still had gulags and secret police and sharp limits on public speech, they argued, the hints of pluralism and responsiveness that some saw in CPSU politics were overwhelmed by the enduring organizational and cultural legacies of totalitarianism. // and one of the words that appears frequently in official rhetoric about intra-party democracy in China is “consultative”…will the Internet force the rhetoric closer to reality? See also this essay from official Yu Keping–How to Achieve Orderly Democracy

Opposing editorials reflect ideological rift in Communist Party | South China Morning Postheadline may be overstating things // “Certainly, the People’s Daily often reflects the view of the conservatives while the Study Times represent the liberals,” said Deng Yuwen , former deputy editor of Study Times . But, he added, yesterday’s articles did not necessarily represent the view of certain leaders. // remember Deng Yuwen used to work at Study Times, wrote several pieces that were seen as very liberal, was finally removed from his job after writing an oped about North Korea in the Financial Times

Related:Soviet fiasco a lesson for China – OP-ED – Globaltimes.cn A Xinhua commentary penned by Wang Xiaoshi warning that unrest in China would leave it worse off than the Soviet Union has been hotly discussed online recently. The idea of this article is in line with mainstream views, but failed to give a professional description of the current situation of Russia. Liberals have hit out at the article, but they do not have a professional knowledge of Russia’s fate either. The belief that the collapse of the Soviet Union has benefited the Russian people is a naïve one.

Fonterra CEO apologizes, sees China dairy curbs lifted within days | Reuters Rushing to China, one of Fonterra’s biggest markets, CEO Theo Spierings sought to reassure customers, telling local media that processing methods would kill off harmful bacteria. “We really regret the distress and anxiety which this issue could have caused,” he said. “We totally understand there is concern by parents and other consumers around the world. Parents have the right to know that infant nutrition and other dairy products are harmless and safe.” // how much was in what were apparently envelopes of cash that Fonterra handed out to the Chinese reporters at the press conference? Would people in New Zealand care?

The Shaolin Soap Opera – Economic Observer Three years ago China National Travel Service took control of the Shaolin temple with promises of greater investment. But the investment never materialized, and now the UNESCO World Heritage Site is plagued with conflict and scandals.

China Services to Manufacturing Suggest Slowdown Stabilizing – Bloomberg The non-manufacturing Purchasing Managers’ Index showed the first acceleration since March, government data released Aug. 3 showed, following an unexpected gain in a manufacturing PMI last week. A services index from HSBC Holdings Plc and Markit Economics was unchanged in July, a separate report showed today.

China’s Debt Surge Pressures Xi-Li to Avert Lost Decade – Bloomberg Half of the economists in a Bloomberg News survey say non-performing local-government and corporate debt will probably have a “significant impact” on China’s credit and economic growth. The central government will deal with bad loans at local governments in the next 18 months by expanding the municipal-bond market and letting localities refinance with direct bond sales, respondents said.

China Needs 2 Years to End Interest Rate Regulation, Lian Says – Bloomberg As their next steps, policy makers are likely to remove restrictions on the rate banks pay for five-year deposits and allow lenders to issue certificates of deposit that offer higher rates and can be sold on a secondary market, Lian Ping, Shanghai-based chief economist at the bank known as Bocom, said at a briefing today. Five-year term accounts are about 3 percent of total deposits, Lian said.

Mild inflationary pressure may pose policy constraint: analysts – Xinhua “China now faces both potential inflationary pressures and risks of an economic downturn,” Liu Wei, economist and vice president of Peking University, told Economic Information Daily in Monday’s edition. The two aspects, according to Liu, usually induce opposite economic policies, so China has to carefully seek a balanced portfolio of both tightening and relaxing measures. The policy tone of “stabilizing growth” will stay unchanged in the second half, Liu stressed.

Long Live China’s Boom by Justin Yifu Lin – Project Syndicate is he taken seriously inside China? // Indeed, China can maintain an 8% annual GDP growth rate for many years to come, because modern economic growth is a process of continuous technological innovation and industrial upgrading. Of course, this is true for developed and developing countries alike. But developed countries differ from developing countries in an important way. Since the Industrial Revolution, developed countries have always been on the global frontier of technologies and industries, which has required them to invest in costly and risky indigenous research and development.

Can China’s deflation be positive? – MarketWatch Standard Chartered argues that the biggest reason for the fall in the PPI is due to declining producer goods, which tend to be raw materials or tools used to make other goods. This means not everyone is feeling the pain equally: Upstream firms — typically those involved in extracting raw materials — will suffer, but downstream firms could benefit from the same trend.

Secretariat chief Liu Yunshan’s appearance signals start of policy conclave | South China Morning Post Liu Yunshan was accompanied by two other members of the decision-making Politburo – Vice-Premier Ma Kai and party organisation chief Zhao Leji – as he met scientists, engineers, and other top minds in the Hebei resort area, China Central Television reported. Such a gathering of experts also suggested that the key policy meetings had begun, since leaders often call on such academics to provide advice while discussing policy plans. Leaders use the summit to debate domestic issues ahead formal party meetings in the autumn.

成都高投集团董事长平兴被纪检部门带走调查_新闻_腾讯网chairman of Chengdu Hi-Tech Development taken away for investigation…now perhaps two mahjong tables worth of sichuan execs and officials are in trouble // 多个独立消息源对本报记者证实，成都高新投资集团有限公司（下简称“成都高投集团”）董事长、兼上市公司成都高新发展]股份有限公司（000628.SZ，下称高新发展）董事长平兴，近日被纪检部门带走调查。

四川宜宾日报社疑遭枪击现7弹孔_网易新闻中心someone put seven bullet holes in the windows at Sichuan’s Yibin Daily…wonder who they upset //

李天一为轮奸案首个施暴者 受害人兼职驻场_新闻_腾讯网reports that Li Tianyi initiated the gang rape…remarkable how people are using the media and internet to try to preemptively close off every avenue his family may have to extricate him from a long prison sentence // 自李某某等人涉轮奸案曝出后，随着各方消息不断渗出，案情的大致脉络已经有了比较清晰的版本。昨天，有知情人向京华时报透露了此案中更多的内情，称李某某为轮奸案中第一个施暴者，检方提起诉讼时并未确定主犯从犯。记者随后通过相关渠道了解，获证该知情人爆料情况基本属实。

FOREIGN AND DEFENSE AFFAIRS

EU defers China telecoms trade case ahead of key mobile contract – FT.com The EU will hold off making a decision on whether to launch an incendiary trade case against Chinese telecoms companies until after China Mobile selects winners for a huge contract to build a next-generation wireless network in the Asian country. Karel De Gucht, the EU trade commissioner, is inclined to bury the case, according to officials, if European companies are awarded a healthy share of a project that is expected to account for as much as half of global telecoms investment next year.

Whether Abe plans shrine visit in spotlight |Asia-Pacific |chinadaily.com.cn With the Aug 15 anniversary of Japan’s defeat in World War II looming, concerns are mounting once again over whether Japanese Prime Minister Shinzo Abe and his Cabinet members will visit the controversial Yasukuni Shrine, a move that observers say would aggravate regional tensions. Despite Abe’s personal enthusiasm for visiting the shrine, as shown in many of his previous statements, Japan’s media say that this time he is likely to skip the visit on Aug 15.

Abe’s advisory panel to urge lifting of ban on collective self-defense – AJW by The Asahi Shimbun A private advisory panel to Prime Minister Shinzo Abe will recommend Japan lift its self-imposed ban on the right to collective self-defense, as well as the use of force to protect other nation’s troops in U.N. peacekeeping operations, by broadening the government’s interpretation of the Constitution. Under the interpretation, Japan possesses the right to collective self-defense, but cannot exercise it since it exceeds the limits on the use of its military. “The current government interpretation is so narrow that it bans even what the Constitution does not ban,” said Shunji Yanai, chairman of the Advisory Panel on Reconstruction of the Legal Basis for Security and a former ambassador to the United States, on a Japan Broadcasting Corp. (NHK) TV program on Aug. 4.

View of Japan favorable in Southeast Asia, unlike in S. Korea, China – AJW by The Asahi Shimbun Unlike South Koreans and Chinese, Southeast Asians and Australians report a favorable opinion of Japan, a survey by a U.S. think tank showed. According to a recent survey of Asia-Pacific nations by the Pew Research Center, roughly 80 percent of Malaysians, Indonesians, Filipinos and Australians said their perception of Japan is favorable. But closer to home, the survey showed anti-Japan sentiment among South Koreans at 77 percent and in China at 90 percent.

China-Myanmar Pipeline Starts Operation-Carnegie-Tsinghua Center Speaking to CCTV, Carnegie-Tsinghua’s Wang Tao explained the political details behind the production sharing agreement signed between China, Myanmar, South Korea, and India that has produced the China-Myanmar Pipeline. Wang noted that China’s engagement with foreign multinationals during production of the pipeline, which will funnel an annual two million tons of crude oil to Myanmar, likely helped the project move forward and gain security.

Sri Lanka Opens $500 Million Port Terminal Built by China – Bloomberg Sri Lanka opened a $500 million container terminal at Colombo Port today, the biggest investment in the island’s harbours, as the nation seeks to upgrade its infrastructure with Chinese help. The terminal, built and operated by China Merchants Holdings International Co. (144), will handle 2.4 million containers a year and boost Colombo’s capacity by almost half, according to the Sri Lanka Ports Authority. President Mahinda Rajapaksa inaugurated the facility.

China’s Blue Water Space Port – All Things Nuclear Next year China will open a new space port on a tropical island in the South China Sea. In addition to supporting a new generation of wider-bodied space launch vehicles that will expand China’s capability to carry larger and heavier spacecraft into Earth orbit and beyond, the opening of the new launch facility on Hainan Island marks a noteworthy shift in the culture of the Chinese space community.

Video game lets players fight Diaoyu invaders- China.org.cn A first-person online shooting game co-developed by the People’s Liberation Army, which allows players to virtually defend China’s Diaoyu Islands, became available as a beta test download on Thursday. Glorious Mission Online, a game jointly developed by the Nanjing Military Area Command of the PLA and the Giant Interactive Group Inc, also features the Liaoning, China’s first aircraft carrier. The game is actually an update of Glorious Mission, which was developed and distributed among PLA troops in 2011.

China warns against rush to set code of conduct in South China Sea – Xinhua | English.news.cn The envisaged Code of Conduct in the South China Sea (COC) cannot be set in a rush as it concerns the interests of many countries and lots of work is required, said Chinese Foreign Minister Wang Yi on Monday. China and members of the Association of Southeast Asian Nations (ASEAN) have agreed to work on COC within the framework of the implementation of the Declaration on the Conduct of Parties in the South China Sea (DOC), Wang told reporters. China has been positive and open to COC and have taken note of positions of concerned parties, said Wang, who is in Vietnam for a visit. China believes that there should be no rush. Certain countries are hoping that COC can be agreed on overnight. These countries are having unrealistic expectation and taking unserious attitudes, said Wang.

TECH AND MEDIA

Alibaba Tackles Counterfeiting in China – WSJ.com “Counterfeiting is a cancer we have to deal with,” Alibaba founder Jack Ma said at a news conference in April, when the company announced its partnership with government agencies to fight piracy online and offline. Later this month, a group of Alibaba officials will travel to the U.S. to meet with representatives from brands, industry associations and the government in Los Angeles, New York and Washington to discuss intellectual property issues, the company said.

Mobile Game Developers Enjoy Win Streak, but Analysts Are Skeptical – Caixin In the first seven months of the year, every one of the top six mobile game developers listed in Shanghai or Shenzhen has seen their share prices at least double. The share price of the leader, Beijing Ourpalm Co. Ltd., which debuted on Shenzhen’s ChiNext board in May last year, has risen by almost 300 percent this year.

Reuters Insider–Taobao and Sina Integration E-commerce giant Alibaba’s investment in the Weibo microblogging service has resulted in users being bombarded with targeted ads for everything from bikinis to coffins. Anita Li examines the reaction.

SOCIETY, ART, SPORTS, CULTURE AND HISTORY

Beijing’s UCCA is looking for excellent conversationalists for a project by the internationally acclaimed artist Tino Sehgal. The project, which was previously shown at the Guggenheim in New York, takes the form of a cross-generational dialogue about the notion of progress and the multiple ways that the concept can be understood and problematized. The overall aim is to initiate a conversation inside the space of the museum about who we are as a society or individual. All participants should be fluent in Mandarin (preferably without an arts background). Participation will be remunerated.Those interested please contact ts at ucca dot org dot cn // 尤伦斯当代艺术中心正在为享誉世界的艺术家提诺·赛格尔的项目寻找解说员。这个项目曾经在纽约的古根海姆美术馆展出，通过四代人的对话探求“进步”的意义，并通过多种方式让人们了解这一概念。我们的目的就是在美术馆的空间内开启一段谈话，共同探讨“我是谁”作为一个社会群体和个人的意义。所有的参与者都必须讲流利的普通话（没有艺术背景更佳）。我们会支付参与者酬劳。更多信息请垂询 ts at ucca dot org dot cn

China is getting fatter: survey |Society |chinadaily.com.cn Chinese people between the ages of 20 and 39 are increasingly becoming overweight while their athletic abilities are declining, according to a recent national survey. Nearly 34.4 percent of Chinese adults between the ages of 20 and 69 are overweight, while 11.1 percent of young adults from the ages of 20 to 39 are not only obese but have on average added 1.92 kilograms to their weight since 2010.

Particle Counting | DIY Compared to Expensive Filters In earlier posts (1, 2), I showed that you can make an effective DIY air purifier to clean Chinese air pollution out of your home air. But just because the DIY filter is effective doesn’t mean it’s as effective as the Ferrari filters. How effective is the DIY filter compared to the expensive filters? // has this it Weibo yet? IQAir will not like it

BEIJING

北京一超市保安队长被捅死 疑因工资引摩擦(图)_新闻_腾讯网security guard stabbed to death by colleague in the Jingkelong in Sanlitun, apparently in wage dispute // 【北京三里屯京客隆超市发生命案 保安队长被捅死】昨晚7点半左右，京客隆三里屯店，一名男子手持两把刀在店内将一人捅伤，当场死亡。据称，死者为京客隆保安队长，因扣疑犯工资引起摩擦。疑犯不到20岁，曾为京客隆保安。事发后，京客隆店门关闭，称由于线路故障暂停营业